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China's Manufacturing Activity Logs Marginal Growth

(RTTNews) - China's manufacturing activity continued to log a moderate growth in May despite escalating trade tension, according to survey data from IHS Markit.

The Caixin Purchasing Managers' Index came in at 50.2 in May, unchanged from the previous month. The reading was forecast to remain stable at neutral 50.0.

A score above 50 indicates expansion. The headline PMI indicated expansion over the last three months.

However, the official survey revealed that the factory sector contracted for the first time in three months reflecting the escalating trade disputes with the U.S. The PMI declined to 49.4 in May from 50.1 in April.

The private survey today showed that production remained stable in May after a slight increase in the previous month. At the same time, new business growth quickened slightly driven by a renewed increase in export sales.

Increased demand helped to lift the purchasing activity for the first time in five months. Higher orders also placed pressure on capacity.

Companies retained a relatively cautious approach towards employment, noting a slight decline in staffing levels for the second successive month.

On the price front, the survey showed only a marginal increase in average input costs. Meanwhile, factory gate prices were unchanged from the previous month, with a number of firms commenting on competitive market pressures.

Business confidence slipped to the lowest level since the series began in April 2012 amid concerns of an escalating China-US trade war and forecasts of relatively subdued global demand.

"Overall, China's economy showed steady growth and resilience in May," Zhengsheng Zhong, director of macroeconomic analysis at CEBM group said.

"The trade tensions between the U.S. and China are having an impact on confidence and the best way to respond to this is to boost the confidence of enterprises, residents and capital markets by carrying out favorable reforms and to undertake timely adjustments to regulations and controls."

Shilan Shah and Franziska Palmas, economists at Capital Economics, said the downbeat PMI readings for April and May suggest that economic growth has not yet bottomed out and is consistent with the view that there are still some downside risks to near-term activity.
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